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Understanding PPP Loan Forgiveness

Understanding PPP Loan Forgiveness

April 24, 2020 | Read Time: 4 Minutes


So you just learned that you closed your PPP loan and the funds are now in your account. You can relax now, right? Be careful, this article might leave you thinking that taking these funds is going to be more work than it appeared during the application process.


The SBA just funded more business loans in 13 days than it has in the last 14 years. The swift loan processing was accomplished primarily due to the participating SBA lenders and some relaxed underwriting rules, exclusively for the PPP loan program. For PPP applications, lenders were required to:

  1. Confirm receipt of borrower certifications in the PPP application.
  2. Confirm receipt of information demonstrating that the borrower had employees for whom the borrower paid salaries and payroll taxes on or about February 15. 2020.
  3. Confirm the dollar amount of average monthly payroll costs for the preceding year by reviewing the payroll documentation submitted with the borrower’s application.
  4. Follow applicable Bank Secrecy Act requirements.

At this time, it is not clear what penalties, if any, lenders might be subject to if they have not performed these functions.

Now let’s look at Forgiveness

An important part, and the most recognized part, of the PPP was that the amount borrowed would be forgiven. After a compressed timeline, two interim rules, and a series for FAQs, there was some indication that forgiveness would be possible IF you followed a list of rules, including proving that the money was being used for “qualified’ expenses for the employees. Although the forgiveness calculation is still not clear, borrowers seeking forgiveness can expect this:

The Act states that a borrower seeking loan forgiveness is required to:

  1. File an application.
  2. Submit documentation verifying the number of full-time equivalent employees on payroll and pay rates and provide certain federal and state payroll tax and unemployment insurance filings.
  3. Submit documentation evidencing payment, including canceled checks, payment receipts, transcripts of accounts, or other documents verifying payment of payroll and other allowed costs, such as mortgage obligations, lease obligations, and utility payments.
  4. Submit certification from an authorized representative of the borrower that.
    1. The documentation presented is true and correct.
    2. The amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments.
  5. Provide any other documentation the Administrator deems necessary.

The lender decides whether to grant forgiveness and has sixty days from receipt of the loan forgiveness application to issue a decision. Loan forgiveness shall not be granted unless the above information is submitted to the lender servicing the loan. It is incumbent on loan recipients to keep detailed records indicating the use of the funds, and it is beneficial to maintain schedules detailing the figures provided to the lender.

The IFR specifically states that “The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs.” Further, the Administrator will hold harmless, “any lender that relies on such borrower documents and attestation from a borrower.” Therefore, it is imperative that the borrower maintain the records necessary to prove the proper usages of funds. If you would like Huberty to assist you in preparing for the forgiveness calculation, please reach out to one of our offices in Eastern Wisconsin, and we will set up a time to discuss our process. Remember, time is of the essence here, so please start early.

Read more about our accounting firm’s resources for small businesses during this time:

New Considerations for Small Business Owners by Shawn Rice | Managing Your Business During This Disruption